When Boeing spent $580 million in July to buy a South Carolina plant that makes parts for its 787 Dreamliner, quiet desperation spread throughout the state. Is this where the company would hire 900 people to build a second assembly line? But the more telling decision might have been when the South Carolina facility voted to oust the Machinists union.
The frustrating aspect of this delicate dance with the aerospace giant is that the key factor could very well be an internal issue. Yet its decision would have an enormous impact on the state’s economy and other aerospace-related businesses in the state, including several Spokane-area companies, such as Kaiser Aluminum, Triumph Composite Systems Inc., Goodrich Corp. and Cascade Aerospace.
Boeing cannot be faulted for wanting a reliable work force to assemble its new jetliner. An eight-week strike by the Machinists union last year translated into $6.5 billion in lost revenues, and the company has stated this was a turning point in considering other states. Gov. Chris Gregoire’s office is trying to do what it can to bring the two parties together, though it wouldn’t go into details.
What we do know is that the state has assembled the “business case” for choosing Washington over other presumed contenders, and it’s pretty impressive. You might even call it surprisingly impressive, given the long-standing complaints about the state being uncompetitive.
Forbes magazine rates Washington fourth in business climate, ahead of South Carolina (25th), North Carolina (fifth) and Texas (eighth). The Kauffman New Economy Index ranks Washington second in the nation for business climate. South Carolina is 34th. The report says yearly taxes for an assembly plant in Washington state would be lower than those in competitors’ states.
Washington’s unemployment insurance rates are higher, but the fund is stable – as opposed to competitor states, where the funds are insolvent.
To fix that and pay back federal loans, those states will have to raise their rates. On Tuesday, a South Carolina panel of experts predicted businesses would have to pay between $249 and $567 per worker to fill the gap.
The governor’s report does not mention Washington’s liberal worker’s compensation system, which is an area where the state is not competitive; nor does it offer new incentives. But still on the table are $3.2 billion in tax incentives adopted in 2003 that were specifically designed to lure new Boeing business.
One key consideration for Boeing could be the fact that building parts of the Dreamliner in disparate locations has caused numerous production migraines and a two-year delay. One reason it purchased the South Carolina facility is that the previous owner was incapable of delivering a decent fuselage.
The report makes a compelling argument that Washington has advantages in work force skill and the business and educational infrastructure needed for large-scale aerospace projects.
That might not be enough to overcome internal Boeing labor wars, but it does show business leaders that the state has been responsive.